The strong dollar, ample stockpiles and an economic slowdown are combining to pull down food prices around the world for the third month in a row. The UN Food and Agriculture Organization said its monthly Food Price Index fell by 1.9 percent during January and was at its lowest level since April 2009. The index, which tracks the international market prices of cereal grains, vegetable oils, dairy, meat and sugar, has been on the decline since peaking in 2011.
Prices fell for all of the five commodity groups in index during January. Sugar recorded the largest decline, down 4.1 percent due to improving conditions in Brazil, the No. 1 sugar grower and exporter. It was the first time sugar prices fell in four months. Dairy was down by 3 percent on a mixture of “torpid” demand and large supplies, said FAO. Cereals and vegetable oils each fell by 1.7 percent, while meat was down by 1.1 percent.
“Early prospects for 2016 cereal crops are mixed, partly influenced by the prevailing El Niño-associated weather patterns,” said FAO in the Cereal Supply and Demand Brief, a companion to the food index report. Early, beneficial rains point to the third largest wheat crop in a row in Europe while paltry rainfall hindered wheat planting in India.
“In the Southern Hemisphere, early-season dryness in Brazil and Argentina could result in reduced plantings. Conditions are mostly unfavorable in Southern Africa where El Niño-associated dry and hot weather has severely weakened crop prospects, especially in South Africa where preliminary indications point to a 25 percent likely cut in production,” said FAO. “As for rice, the 2016 outlook for crops along and south of the Equator is dim, with insufficient water lowering plantings in Australia and delaying them in Indonesia, while excessive rains and low returns are negatively affecting sowings in South America.”